Avoid Running Out Of Money | First Financial Consulting

Avoid Running Out Of Money

How To Avoid Running Out Of Money

Life is full of things to worry about, and a recent survey showed that two-thirds of people are more afraid of outliving their money in retirement than they are of actually dying. That may seem surprising, but it can be a real possibility and a legitimate fear if you haven’t planned properly. In this article, we’re giving our top 5 tips on how to avoid running out of money in retirement. Now, we assume you have done some planning. If not, well, that’s the first place to start.  You need to put together a retirement plan;  don’t leave this to chance. But assuming you have a plan, the trick is to make sure you’ve done it properly. These steps can help you determine whether some changes are needed to ensure you can enjoy retirement with at least one less worry.

image depicting people fear running out of money more than death

Plan On Living Longer and Invest in Stocks

When the Social Security Program was first created, life expectancy was around 65. Today, life expectancy is in the mid-80s. So, don’t let your memory of what things were like back then distort the realities of today. You need to plan for your assets and cashflow to last much longer than you think. There are lots of rules of thumb and old adages which suggest that you should automatically shift from stocks to bonds as you age. We don’t think that makes sense because it doesn’t take into consideration inflation and the fact that both your retirement income and retirement assets will need to grow to keep up with inflation. Stocks have consistently shown themselves to be better than bonds over the long term in fighting inflation. Stocks can be volatile, but figuring out how many you should have will go a long way towards shoring up retirement.

Fine Tune The Budget

We’re not advocating that you need to put yourself on an austerity budget. Retirement should be a time when you can enjoy a lifestyle you’ve dreamt of having. But as you approach retirement, you should revisit your budget to make sure it accurately reflects what your normal expenses will be in retirement, as well as accurately reflects what extra expenses you might have. Remember, we assume you’ve done some planning. But you can’t stop there. Build a few alternative plans designed to stress-test your budget planning. What if your “plan A” doesn’t work out? Do you know what types of events could set you back, how much the damage would be and how you could overcome those setbacks? It’s critical you update your retirement plan to consider multiple “plan B” scenarios so you can be prepared.

Avoid Running Out Of Money By Monitoring Your Assets

Every great retirement plan is built on an assumption of what your assets will earn. If you don’t know what that earnings rate is for each key asset, stop right now and ask your advisor to tell you what that number has to be. You might be surprised by how unreasonably high that assumption is. Beyond that, however, it is important that you monitor your assets as you prepare for retirement – and as you enter retirement – to see if you are in fact earning that assumed rate of return. There’s no better time than NOW to see if your investments are doing what they need to do. Learning what may be bad news is recoverable now; it can be a disaster if you wait until you’re already retired.

Ease Into Retirement and Delay Taking Social Security

Don’t feel pressure to go from 100% to 0%. You may be counting the days until you can quit your present job, but that doesn’t mean you can’t take on some part time work you enjoy. Keeping busy and productive will help your physical and mental health. As a bonus, it can also do wonders for your financial health. Every dollar you earn is one less dollar you have to withdraw during retirement. And every day you delay withdrawing from a retirement account is one more day you’re your dollars can keep growing. If you can delay taking social security, you can also avoid a burden on your retirement assets. Every year you delay taking your benefit increases the amount of that benefit for the rest of your life. This can be a very powerful strategy to avoid running out of money in retirement.

Don’t Forget The House

The “home” you’re living in probably provides a great deal of emotional comfort.  It may be where you raised the kids, where you’ve experienced wonderful memories, and where you’ve built a wonderful life. Whether or not you’re considering downsizing at some point, you should keep in mind that your “home” is also an asset, and the equity in that asset may provide a secondary emergency fund. We don’t recommend that everyone should tap into their home to fund retirement. But as you’ve probably gathered from the tone of this article, we’re big advocates of developing “plan B” options so you can weather all the storms life may throw at you. Your home may be one of those contingency plans.

There you have it – 10 concrete steps you can take to avoid running out of money in retirement. By implementing these steps, you can be in a significantly stronger position to enjoy the retirement you’ve always dreamed of having, and your confidence level will be very high. Having one less thing to worry about can be a tremendous blessing. We’d be happy to help you with any of these steps and to give you the peace of mind you deserve.